Michael Gramins, a trader of Residential Mortgage‐Backed Securities 27 ("RMBS"), was convicted of conspiracy to commit wire fraud and securities fraud 28 by a jury in the United States District Court for the District of Connecticut. At Gramins's trial, the district court had admitted testimony from one of Gramins's counterparties tending to establish that the counterparty credited Gramins's representations when Gramins acted as a "broker" between two counterparties.Shortly following Gramins's conviction, we decided United States v. Litvak, 889 2 F.3d 56 (2d Cir. 2018) ("Litvak II"), which held in the context of a similar prosecution that the erroneous and idiosyncratic viewpoint of a defendant's counterparty could not be relevant to the objective, "reasonable investor" standard for materiality in a securities fraud prosecution. The district court (Chatigny, J.) then sought to apply our holding in Litvak II to this case, and granted Gramins's motion for a new trial on the basis that counterparty testimony had been improperly admitted against Gramins at trial. We conclude, however, that the counterparty testimony at Gramins's trial was not improperly admitted and did not implicate our holding in Litvak II. Accordingly, the judgment of the district court is REVERSED and the case is REMANDED to the district court with instructions to reinstate the conviction.
Mullins was involved with a Tempe, Ariz.-based technology company called Xhibit Corporation, whose stock was publicly traded on the over-the-counter market and which merged with the airplane catalog SkyMall in May 2013. In 2012 and 2013, before the SkyMall merger, Mullins and others made misrepresentations about the company when recruiting investors. They also engaged in manipulative trading of Xhibit stock that is prohibited by U.S. securities laws and regulations. Their prohibited trading activities artificially inflated Xhibit's stock price and made it falsely appear that there was more demand for the stock. Because of these actions and other events, Xhibit's stock price rose sharply, from less than a dollar in early 2012 to a peak of more than seven dollars in May 2013, and then fell just as quickly. Mullins made more than $1 million from selling much of his own stock before the stock price dramatically fell, while unknowing shareholders lost millions.Two others pleaded guilty to conspiracy to commit securities fraud in related cases and were sentenced in June 2019. Nicolas Russo, Jr., 72, of Fountain Hills, Arizona, and Larry Eiteljorg, 70, of Scottsdale, Arizona, were sentenced to probation and ordered to pay restitution after cooperating with the government's investigation.
And yet my concern is that, for some, the focus on price and time and the avoidance of trade-throughs has become a substitute for a more robust best execution analysis-the notion being, that if brokers simply seek the best price at a given moment, other variables are less important, or perhaps more difficult for a regulator or customer to criticize. I recognize that some of this may result from a weighing of risk, both from a regulatory standpoint and also commercially. Whereas several best execution factors are subjective in nature, and perhaps defensible under scrutiny, price is relatively cut and dry. But price is just one factor in a best execution analysis, not only when firms make routing decisions, but also when regulators review these decisions after the fact. Finally, some have noted that this framework for regulator review of best execution often has been process-oriented-i.e., requiring that brokers show their work-rather than focused on outcomes for customers. Is this how we should continue to think about best execution, or should we focus more on outcomes? For example, what if a broker accesses a quote with relatively small size, perhaps to satisfy OPR, but by doing so chases off a larger order that may have more closely achieved best execution for the customer? Should there be some combination of approaches, such as a safe harbor for certain outcomes?
[I]n raising money for his private funds, Miller - then based in Mishawaka, Indiana - touted his Amish heritage to raise money from the Indiana and Michigan Amish community and encouraged his victims to invest their retirement savings in his funds.. . .[T]he SEC alleged that, while Miller promised he would not be paid for managing the funds, he took over $1.1 million of investor money to pay himself and to buy out his former business partner. The SEC further alleged that Miller lied to investors about the nature of their investments and purported safeguards, which he never implemented. When Miller's investments failed, his funds collapsed and 72 investors lost over $4.1 million. On August 10, 2017, the Court entered a default judgment against Miller for his repeated failures to comply with discovery orders.
[F]einer and FNR began soliciting funds from investors in 2010, including more than $10 million from at least 62 investors since 2014. According to the complaint, Baver assisted Feiner with raising funds for certain of these entities starting in 2014. The complaint alleges that investor funds were pooled together in limited liability companies that would purchase nursing homes and assisted living facilities throughout the Midwest, and, since 2010, Feiner and FNR raised funds for approximately twenty limited liability companies. The defendants are alleged to have told investors that the investments were low-risk and would generate high returns from the successful operations of the nursing homes and assisted living facilities. However, according to the complaint, the defendants misappropriated investor funds to, among other things, pay distributions to earlier investors, support other struggling properties, pay back loans taken out on other properties, and for their own personal use.